While January and February saw moderate recovery in sales across metro cities, barring Delhi NCR, the month of March saw site visits and transactions coming to a halt due to the outbreak of COVID-19 in India.
The outburst of novel Coronavirus in India has been detrimental to the economic health of the country, and both real estate and construction sectors have been at the receiving end, like many others. The initial impact was noted with reducing number of site visits, which gradually converted into fewer sale conversions. The subsequent nationwide lockdown has put a temporary break on the construction work of over 15 lakh housing units across the top eight cities alone, further delaying project deliveries by a minimum of 2-3 quarters. The event is most likely to defer any new launches planned and drive real estate prices downwards in most markets.
According to the 99acres Insite Report for the January to March 2020 quarter, while January and February saw moderate recovery in sales across metro cities, barring Delhi NCR, the month of March saw site visits and transactions coming to a halt due to the outbreak of COVID-19 in India. Enquiries in the affordable segment stayed afloat; however, sale conversions are expected to remain bleak until the next quarter.
In fact, demand for ready homes kept the market afloat in the first quarter of the year until the global crisis in the form of coronavirus struck India. Come March 2020; property transactions came to a sudden halt as homebuyers effectively followed the nationwide lockdown. In the first two weeks of March, property enquiries dipped by over 20 per cent in northern metros and by 7-8 per cent in southern metros. Eventually, new project launches were deferred indefinitely and deal closures reduced to almost zero. Owners, too, exited the market due to uncertainties looming the opening up of markets and life getting back to normalcy.
The shutdown of construction activities posed a larger threat to the financial health of the developers, who were yet to overcome from the Non-Banking Financial Companies (NBFC) crisis. The timely completion of residential projects is also doubtful now. Of the 15 lakh under-construction units across the top eight metro cities in India, Mumbai Metropolitan Region (MMR) holds 57 per cent of the inventory, i.e. 8.90 lakh units, followed by Delhi NCR with 27 per cent or 4.25 lakh units, which have been stalled.
Property rates across metro cities remained stable this quarter with Hyderabad, Bangalore and Ahmedabad reporting a marginal one per cent uptick in the capital ‘asks’, and the rest maintaining status quo, QoQ. The pandemic, however, may trigger price correction in short to mid-term.
Government’s thrust on affordable housing remained evident, despite many metros reporting an oversupply of homes priced under Rs 40 lakh against its demand. Of the 6.24 lakh unsold units across the top eight metro cities, about 36 per cent fall under the affordable housing bracket. Slow-paced offtake of homes under Pradhan Mantri Awas Yojana (PMAY) and compromised amenities in such projects may make matters worse in the times to come. As of now, Uttar Pradesh, Gujarat and Andhra Pradesh lead all states in the development of low-cost homes across the country.
“Much like other industries, the Indian real estate sector was also at the receiving end of the nationwide lockdown following the COVID-19 outbreak. Housing demand, enquiries and sales volume, which posted growth in the first two months of Jan-Mar 2020, slowed down in March. The industry now heavily relies on governmental intervention to support its functioning and aid its revival. Measures including tax exemptions, deferring of tax payments, extension in the yearly financial closing date, and relaxation policies will act as growth stimulators for the industry in mid-to-long term,” says Maneesh Upadhyaya, Chief Business Officer, 99acres.com.
Upadhyaya says that the real estate sector in India has effectively survived several past challenges starting with demonetisation, followed by the implementation of RERA, Goods and Services Tax (GST), and more lately the liquidity crisis amongst NBFCs and developers. The industry expects home buyers to return to the market only gradually as social distancing restrictions get lifted, even though prices are likely to come down. Pro-realty measures announced by the Government, including loan moratorium and repo rate cut by 75 basis points have helped soothe the sentiment of uncertainty among homebuyers, but the industry is looking to more support from the government.
Currently sitting with an unsold inventory of around 6.24 lakh residential units and 15 lakh under-construction homes in top eight metros, the real estate industry would need more definite growth stimulators such as further cuts in borrowing costs for homebuyers, staggered/deferred payments of various levies, support to NBFCs to improve their liquidity which in turn would mean better access to capital for developers, and penalty exemptions for the delay in project completions for developers.